To stunned audiences nationwide, Portsmouth thrashed Spurs recently and will play the Wembley final on May 15. The players’ bonuses were contracted to kick in if/when the Club reached the final. 

But Portsmouth is in financial turmoil – it went into administration in February with, apparently, debts of £70 million. This leads me to wonder why the club would even offer players contracts that offer cash payments ranging from £50,000 to £100,000 in the first place. 

Perhaps the club felt they needed to offer bonuses to lure top class-players away from the glittery clubs and expensive shops in London. Or maybe Portsmouth didn’t really expect to get so far in the FA Cup and were confident that the bonus clauses were good window-dressing that they’d never have to pay out. Whatever the Club’s reasoning, it’s a strategy that has backfired, and put them under even more money pressure. 

This should be a warning to small businesses suffering their own money troubles. Employee perks and bonuses can be an effective way of attracting and retaining employees, eventually improving business results. But cash payouts, as well as the most common incentives, such as company cars, season-ticket loans and gym membership, can prove costly.

 If you’re struggling, remember that before offering remuneration packages you should take into account how appealing any bonuses will be to potential employees – and also much it costs to provide, then administer them. 

If your firm still has incentives to fulfill under your employments contracts, you may have to rethink. Negotiating discounts with local suppliers is a clever way for businesses to continue to provide great employee benefits – for example, you could negotiate a group-rate gym membership with a local firm. Small firms should also consider offering low- or no-cost opportunities such as flexible working, which employees may value more than a pricy perk. 

However, don’t be too mean – it’s essential for small businesses to balance an exciting remuneration package that attracts the best candidates with the long-term financial considerations of the business. Otherwise when your big day comes round, you may find your best players are missing. 

There are legal considerations to take into account when offering benefits such as flexible working. Make sure you keep up-to-date on the Law Donut.

Ian Mann, barrister of 13 King’s Bench Walk, Temple, explains the case that says, more or less, yes. In a meeting with the Hertfordshire school she worked at as a teaching assistant, a Mrs Dogherty secretly recorded not just the “open” part of the meeting she attended but also the “private” session after she was asked to leave the room whilst the school governors considered her fate. Her contract of employment did not forbid covert recordings of meetings.

In court, the school argued that the governors’ rights under European Human Rights legislation had been infringed. This was rejected by the Employment Appeal Tribunal (EAT). The central issue, as far as the recording of the “open” part of the meeting was concerned, was to consider whether the evidence on the tape was relevant to Mrs Dogherty’s unfair dismissal claim. It was and so was allowed to be heard.

As Ian Mann points out, this is not new law – the EAT relied on a 2004 case as confirmation. Furthermore, English courts are normally more interested in the quality of the evidence than in how it was obtained. Put another way, does the end justify the means? In this case it did, but only as far as the “open” part of the meeting.

A different result applied to the “private” session – when Mrs Dogherty had been asked to leave the room for the governors’ private discussion. The recording of that part of the meeting was not allowed in evidence.

This is a difficult issue for employers. How should you approach it? Start by drafting or amending your contracts of employment and employment handbooks to ban any covert recording of disciplinary meetings. If, as an employer, you face conducting a disciplinary meeting, state that you do not agree to the meeting being recorded and ask if the employee is in fact doing so. If the employee does so and lies, it could affect their credibility. However, raising recording as an issue can be a double-edged sword; there is no reason why, if an employer intends to conduct proceedings fairly, they would not agree to a tape being made. And it is likely that the file will be allowed in evidence anyway.

You could also consider arranging your own recording (not covertly, of course) thus meaning that there is no need for the employee to make their own copy. Of course, this also means that you have to conduct the meeting fairly. An Employment Tribunal is likely to be impressed by an employer who tapes disciplinary meetings because it demonstrates openness and confidence in dealing with the meeting. There can also be no argument in Tribunal as to what was said at the meeting. It is of course important to ensure that whether taped or not, good notes of the meeting are taken, and that whoever is present in the meeting has taken legal advice beforehand and is aware of what ought and ought not to be discussed at such meetings.

I am greatly indebted to Ian Mann, Barrister of 13 King’s Bench Walk, Temple, for supplying a copy of the recent case of Chairman and Governors of Amwell View School v Mrs C Dogherty UKEAT/0243/06/DA which deals with the issues succinctly.

Who is entitled to be paid and for what?

The UK has a remarkably flexible labour market, and the answer depends on what type of contract you have got with your staff. There is no general right for employees who don’t turn up for work to be paid, and if they are stranded and can’t get to work, you may not be obliged to pay them. Many employers do pay more than they are required to, but it is important to know when you are choosing to pay more, and when you have to pay.

Hourly paid workers

People who are paid by the hour are not automatically entitled to be paid for their absence.

Employees can ask you to allow them to take the day(s) as paid leave. You are not obliged to authorise paid leave retrospectively, but if you do so, make sure the holiday records are kept properly up to date. You cannot decide retrospectively to make this a day’s leave without the employee’s consent.

Salaried staff

There is an historic tradition in the UK (fading fast) that distinguishes between staff on annual or monthly salaries, and those on an hourly rate – the old “white collar-blue collar” divide. Traditionally salaried staff are not paid by the hour, do not receive overtime when they work more hours, nor receive a deduction when they work less.

These staff are viewed as being paid for service, rather than for the particular work performed. This group of individuals is generally entitled to pay unless the contract provides otherwise. You should check your contracts carefully. This applies even if no work is actually performed or where the employee is prevented from working due to factors beyond their control, as long as the employee remains ready and willing to serve the employer. Ready and willing would normally mean making an effort to get to work where it is safe to do so. Local staff who could have made it in would not be automatically entitled to pay if they did not turn up.

Many organisations no longer feel comfortable about having a two-tier contract system, and increasingly have one single-status contract that applies to all. So it’s possible your hourly paid staff may be in the same contractual position as salaried staff. A lot depends on what your contracts say.

Annual hours and flexi-hours contracts

Check the terms of your contracts – it may be that time not worked does not count for payment, and missed work will have to be performed at another time.

How long can this go on for?

No-one knows how long the delays will last. In employment law, this situation is known as “temporary frustration of contract” – when through no fault of employer or employee the contract cannot be performed.

During this period the contract is ‘on ice’ with no work being performed and no money being paid (unless the contract is set up in a particular way – see above).

Employers with time-sensitive work to be performed may find themselves needing to get in other staff or contractors to do the work. Call us if you are not sure if you need to pay your existing staff as well.

Are people going to be dismissed for absence?

Most employers are not going to dismiss people for a problem that is not their fault. However, some employers may feel they have no alternative but to “accept the frustration” of contract if this goes on too long. “Accepting the frustration” means that the employer accepts that the contract has come to an end.

The law of “frustration” says that if the underlying basis of the contract no longer exists, the contract comes to an end. This is not technically a dismissal, though it has a similar effect. Staff with less than a year’s service will find there is not a lot they can do about this, unless their dismissal is related to some form of unlawful discrimination.

Employers will think long and hard before doing this, but for some organisations with deadlines there may be little choice but to find replacements.

Those who were wise enough to set up contracts that did not commit them to pay when no work is done will not have to consider accepting frustration at this point, but those with different contracts may, if this goes on, find themselves with little choice.

If you don’t know if you have to pay people who are stranded – send your contracts to us for a quick free review. – email to advice@irenicon.co.uk or fax them to us.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy. Tel: 08452 303050 Fax: 08452 303060 Website : www.irenicon.co.uk. You can follow Annabel on twitter – http://twitter.com/AnnabelKaye

This is an issue facing an employer friend of mine. There is nothing specific in his employee’s contract of employment stopping the employee (let’s call him Alan) from using or disclosing his employer’s information, but my friend is arguing that the details are his ‘trade secrets’ – confidential information that would be likely to cause real or significant damage to him if they became publicly known. If he is right, Alan cannot use them because ex-employees are under an automatic and implied legal duty to keep their former employer’s trade secrets confidential, whatever their contract says. 

Three issues

But Alan is arguing three points. First, he is saying that the Twitter profile – and everything on it – is his personal profile, not his employer’s profile, so my friend has no right to the details on it. 

Second, he is saying that the details aren’t trade secrets, they are just ‘confidential information’ – information that my friend would not want rivals to find out. ‘Confidential information’ is wider than ‘trade secrets’. Current employees are under an automatic, implied duty not to use or disclose confidential information. But ex-employees can use or disclose confidential information unless it is also a trade secret, or unless they have a contract of employment that specifically says they must. 

Third, Alan is saying my friend authorised him to build up his followers on Twitter – where anyone signed up to Twitter (including competitors) can see them – so my friend has authorised their disclosure. This means they are no longer trade secrets or confidential information. 

My friend disagrees on all three counts. Who wins? 

Confidential information – court backs employer

A recent court case helps my friend. An employer encouraged employee X to invite business contacts to join X’s network on a business networking website. X then left to set up a competing business, and started using those contact details. X’s former employer objected on grounds that the details were the employer’s confidential information, and there was an employment contract between them that prevented X from using confidential information after he left. X argued that the contact details stopped being ‘confidential information’ when they became available on the site. They were not therefore covered by the terms in his contract of employment. 

X lost the case. One reason was that the judge found that the employer’s authority to Y to use such sites had been limited to using them in the performance of his duties as an employee. 

As a result, X was ordered to disclose the contacts’ details to his former employer, and also all documents showing his use of the contacts, and business obtained from them since he had left. 

However, if the employer had not put a limit on X’s use of such sites (for example, had allowed the employee to use the site for non-work purposes too), or there had not been a specific contract clause protecting confidential information, the decision may have gone the other way. 

What’s important

So it’s important that there are contract terms and/or staff policies that: 

• Specify which employees are authorised to use networking sites for work purposes.
• Specify the sites, and the profiles (or accounts) to be used for those purposes.
• Set restrictions on what those employees can and can’t do and say using those profiles or accounts.
• Particularly, make it clear that employees are only allowed to post work-related information, and that they are only being allowed to do so for the purposes of their employment – so that they cannot use or disclose that information either when they leave.
• Above all, make it clear that the information – about customers, suppliers, referral sources – or anything else work-related – posted to such sites is, and remains, the employer’s ‘trade secrets’ and ‘confidential information’, no matter who can see it on the site. 

Confidential information v trade secrets

This leaves my friend with two problems. First, Alan’s employment contract does not specifically stop him from using or disclosing ‘confidential information. So if my friend cannot show the details on the Twitter profile are ‘trade secrets’, he may find they are not protected. 

Worse, it turns out that Alan was, quite innocently, also using the Twitter profile to post personal, non-work items on it too. So, given the court case we looked at earlier, it looks like my friend has two problems … hmm, time for legal advice.

Why I started the Donut

I’ve always found small businesses compelling – what makes them work and the challenge of going it alone are to me the most interesting questions in business. And after 19 years of running my company, BHP, I admire SMEs more than ever.

Running your own show is tremendous fun, especially if you know what you’re doing and can manage the 101 challenges that come your way every month. Which is where BHP content comes in.

We’ve been producing our expert how-to guides, sponsored by blue chips and government organisations, for nearly two decades. But, of course, as an entrepreneur, I wanted something new to do. In a (rare) idle moment online, I scouted about for a really good marketing website for small businesses. There wasn’t one.

So we decided to do it, launching on 20 April 2009. We built small and medium-sized enterprises (SMEs) their own site with everything they needed to make their marketing thrive. Founding partners Google and Royal Mail backed us all the way, as have our ever-growing list of sponsors such as Vodafone and Yell.

What we’ve achieved in a year

As well as Marketing Donut, we launched two more Donut websites to cover starting up and law. We’ve just announced that the fourth site to launch will be IT Donut, scheduled for the week commencing 23 August.

We use 300 top people to provide the expert advice on the Donuts, but, for me, the real experts are also the users. Before we started work, we asked people running small businesses what they wanted from a site. They told us they needed fast, practical and accurate answers to their questions. The Donuts give SME managers that, free. Tools, templates, checklists, the lot: plus the news their business needs to know.

All the Donuts report live on major small-business happenings – we were the first business advice site to break news of the rise in minimum wage on Budget Day. MyDonut, the e-newsletter, now goes out to tens of thousands of people a month – next year numbers should top 100,000. (This is in addition to the 300,000 subscribers to the SME newsletters that we publish for our clients. Life at BHP is one big deadline.)

Since the launch a year ago, the Donut sites have fast become a key player in the UK small-business scene. Our Twitter accounts have over 40,000 followers and our Twitter team picked up two national awards last year.

Local versions of marketingdonut.co.uk, startupdonut.co.uk and lawdonut.co.uk are syndicated to our partners, both nationally and in the regions. Thirty-five organisations already have their own Donut websites and more are coming on stream every month.

The Donut is a strong business model, because it is a win-win for everyone involved. Crucially, BHP had already invested several years building up the strategic relationships and the content before launching the first website. As with most successful SMEs, we always knew that the Donut project would not be a sprint to success, it would be a marathon.

2010-2011: what’s in it for you?

As we expand the core “answers to your questions” pages of the Donuts, we will continue to cover news and key topical issues for you. For instance, this month the Law Donut explains how to cope with recruitment and redundancy as the economy remains fragile, as well as what to do when all your staff want time off for June’s World Cup.

We’re currently building the IT Donut, which will be a comprehensive resource for demystifying IT, troubleshooting and trading online. It will become the first place any small business turns to when they have a tech problem that needs sorting fast. We’re currently recruiting experts who will rid us all of pesky IT stress forever, I hope.

We’ll also be providing a local service for users, thanks to our partners. Law firms, chambers of commerce and enterprise agencies are all getting involved. This is really exciting, as it gives users the best of all worlds – a huge library of constantly updated advice from experts throughout the UK, combined with local content.

An SME owner’s work is never done, so I’m signing off to tackle the above. Before I go – thanks to you, our users, and all our partners and experts, for a great year.

He’s out of luck if he thinks there is one central registry where you can get worldwide protection. As it stands, every country has its own trade marks registry – and systems are territorial so that, for example, registration of your UK trade mark only protects it in the UK. One way to protect the name worldwide is to register it in every country – but that costs tens of thousands of pounds. So my friend needs to be selective about which countries he wants to register in.

For European trade marks, there is a way to reduce costs. Rather than register in every country in the European Union individually, he can use the European Community trade mark system. Registering once as a Community trade mark (at the Office for Harmonisation in the Internal Market, or ‘OHIM’, in Alicante in Spain protects the brand in all 27 EU countries. This is easier and far cheaper than 27 separate registrations.

But if he has already applied to register a UK trade mark, all is not lost. He can apply to extend it so it becomes a Community trade mark. If the EU application is made within six months of his UK application, and succeeds, protection for the Community mark is backdated to the date of the UK application.

However, applicants need to be sure their marks meet the registration criteria set by each EU member state. If one of them refuses a trade mark, the whole application fails. If that happens, you have to decide whether to convert your application into separate national applications – but it costs more and, usually, you need legal advice in each country. One registered, the mark needs to be used in at least one member state within five years or it can be challenged for non-use.

Another option is the Madrid Protocol. Choose the countries where you need protection – 100-plus have signed up to the scheme, including the UK and the USA – and a single registration protects the trade mark in those countries. Initially, applications go to the Intellectual Property Office and are then administered by the World Intellectual Property Organisation (WIPO).

Madrid registrations can take up to three years – much slower than registering in individual countries – but, for anyone who wants protection in more than five states, they are much cheaper. My mate would also have a year to assess whether the countries where he wants to protect his trade mark are good enough markets before he has to pay the rest of the fees. If they are not, he does not need to proceed.

The downside to Madrid is that, if any of his chosen countries refuse the application, he only gets three months to decide whether to carry on in the others. The risk of failure can be particularly high if the USA is one of the countries in the application, because its registration criteria are stricter than many other countries.

If he wants to, his application is converted into individual country applications. Finally, if the application succeeds, he must actually use the mark in each country.

Existing registrations of UK trade marks at the Intellectual Property Office can also be extended using the Madrid Protocol, so they are protected in signatory countries the trade mark owner chooses. Apply within six months of the UK application and the Madrid protection will be backdated.

So it’s back to him now. He has the tricky job of choosing which countries he wants to go for, and which systems to apply under given the costs, timescales and consequences of failure when applying under each system.

But if you think that suggests the nation’s consumers are a savvy, confident bunch you might be wrong. Earlier in March, a government survey also revealed that:

• 77 per cent of customers aren’t aware of the differences between their online and high-street rights
• 60 per cent are less likely to return goods bought online than goods purchased on the high street.

What are we to make of these findings? First, let’s clear up the key difference between distance-selling and bricks-and-mortar customer rights – the cooling-off period – because it’s one that vexes retailers as well as customers. Then we can look at how businesses should deal with customer confusion – and the benefits that can bring to sales.

Clearing up the cooling-off provision

When a customer buys online, they get a seven working-day window during which they can cancel the contract for any reason, including just changing their mind. Broadly speaking, this cooling-off period starts on the day the customer receives their goods, or, for services, the day the contract is concluded.

The rules aren’t quite that simple, though. Various admin details and types of goods can affect, or end, the customer’s rights to a full cancellation and refund. For example:

• a customer wishing to cancel must tell you so in writing (fax or email count) – a phone call isn’t enough
• you must give customers certain written information about their online contract – any delays can extend their cooling-off period by up to three months
• various goods don’t qualify – these include items you’ve personalised for a customer, perishable goods (eg food) and audio-visual products that have been opened
• if the customer agrees that performance of a service should begin before the end of the cooling-off period that would normally apply, then the right to cancel ends when the service starts.

Building trust out of confusion

Many retailers’ response to customers’ lack of knowledge about their cooling-off rights will be something along the lines of “Thank God for small mercies”.

It’s tough times out there and if customers aren’t cancelling orders, then so much the better. At the end of the day, online retailers are required to comply with distance-selling rules, not to provide educational bulletins for customers on them.

True enough. But there’s a bigger picture here.

Surveys show that customers are still wary about shopping online. Trust remains at a premium. So there’s competitive advantage to be found by businesses that outperform their peers at generating it.

Being upfront and accommodating about your rules and procedures about cancellations are an important part of building online trust. Customers want to know you’re not going to suck them into a black hole of non-existent customer service if it turns out they change their mind about a purchase.

Look at Amazon, the self-styled “world’s most customer-centric company”. They bend over backwards to inform customers of their rights and to make cancellation as easy as possible. In doing so, they’ve achieved something close to profit alchemy – turning customers’ lack of knowledge into a way of generating the trust that online businesses crave.

Not for Amazon the dubious benefit of having confused customers hang on to a few items that might otherwise have been returned as cancellations. Instead, they’ve bet on trust and are selling products by the shedload that might otherwise never have been ordered.

For those who aren’t up to date with the changes, the new fit note allows an employee’s GP to declare the patient either “not fit for work” or “fit for some work”. 

Where the patient is not fully fit, the GP can also recommend several different options: a phased return to work; altered hours; amended duties; or workplace adaptations.

At first glance, this looks like the usual recipe for disaster, forcing employers to introduce costly changes. But that turns out not to be the case. If it would be impractical or too expensive to make the necessary changes, you can simply treat it as if the GP had said the employee was “not fit for work” and handle sickness and sick pay in the normal way. 

The upshot should be that you can reduce the number of days lost to sickness and the disruption to your business. It’s good news! 

For those who can’t stand looking on the bright side, it’s worth mentioning that the situation is quite different for employees suffering from a long-term condition. That’s covered by disability discrimination regulations, and you’re legally bound to make reasonable adjustments.

Here are the five changes that your business needs to prepare for now: 

1. Allowances

From 4 April 2010 allowances for statutory maternity pay, paternity, adoption pay and maternity pay are changing from £123.06 to £124.88 per week. Allowances for statutory sick pay of £79.15 per week remain unchanged this year. 

The Government has announced that although it is committed to the principle, it will not go ahead with the planned extension of statutory maternity pay from 39 to 52 weeks this April. 

2. Fit Note Scheme

From 6 April 2010, as an employer you will no longer be presented with the traditional GP sick note setting out the reason for an employee’s absence. Instead, GPs will produce “fit notes” which will focus on the work that an ill person is able to do, rather than what they are unable to do. Again, Business Link has a helpful section of information for employers on the fit note scheme and an example fit note template is available here. 

There are differing opinions on whether the new system will be more or less beneficial to employers; we will have to see how it plays out. For the time being, as an employer, you will need to acquaint yourself with the new fit note form, know how to respond to it, and adjust your absence management procedures to ensure that any adjustments recommended by a GP in a fit note are considered. You should also maintain a record of the reasons for any non-implementation of recommendations. 

3. Right to Train

On 6 April 2010 the new Employee Study and Training Regulations come into force and give a new right for employees to request time off from work for training or study. Initially, this right will only affect employers who have over 250 employees, but by 2011, the right will extend to all employers. Essentially, the regulations set out how an employer should respond to such requests.

My advice would be to ensure your company has a policy to reflect this new right which should include how and to whom in the company the request should be made, who will consider the request and in what timeframe. I recommend maintaining a record of requests together with the reasoning behind any approvals or rejections in order to ensure consistency of process, and to demonstrate equality and fairness in your workplace.

For more information, Business Link provides an overview of the detail which you need. 

4. Paternity Leave

New laws mean babies due next spring may see more of both parents. Rules that come in on 6 April this year, but apply to families with babies due from 3 April 2011, allow dads who satisfy certain conditions up to six months’ paternity leave – provided the mother has returned to work. 

The idea is to give families more choice as to how they balance work and childcare; paternity leave entitlement currently stands at just two weeks. The Government is expected to issue guidance before April 2011 as to how employers can best manage and administer these new regulations, so you do have some breathing space.

However, now is the time to take stock of your company’s current paternity leave policy and amend accordingly, consider whether you are willing to introduce additional flexibility and enhanced rights into your workplace if it is a means for you of attracting and retaining the right employees, review your existing structure and ensure managers are prepared for the new entitlement to take effect. 

Don’t forget to also update your existing maternity leave policy to reflect the mother’s ability to share leave with the father. 

5. Equality

On the horizon, but awaiting Royal Assent at the time of writing, is the Equality Bill. Royal Assent for this Bill is expected in April 2010, and the Act will then be due to take effect in October 2010. There is some discussion as to whether the impending general election will disrupt the Bill’s timetable, but there seems to be cross-party support for it and at this stage there is no indication that the Bill’s progress through Parliament is being delayed. 

The purpose behind the Bill is to “modernise and streamline discrimination legislation” and “make Britain stronger, fairer and more equal”. As such, it’s a biggie and it will have an impact on your business. The scope of the Bill is very broad, and this post will not set out the detail here. 

My immediate advice is that, if you haven’t already, you need to get up to speed with the Bill. As an initial introduction to this mammoth piece of legislation, the Government Equalities Office has a very helpful set of resources, links and bullet-point updates which are easy to digest. Again, with this Bill, there is some breathing space prior to its introduction, but not much, so I’d strongly recommend that you start to conduct an equality audit across the range of your HR policies to ensure compliance with the Act when it comes into force.

6. Annual Healthcheck

Alongside all the above, changes in your business over the past year and expectations of your staff in the future prompt the need for an annual review of your policies; so I always recommend an annual healthcheck of policies, processes and standard employment contracts. 

The first quarter of every year is a perfect opportunity to review HR policies and practices in your business. So, to avoid showers this April, spring-clean your HR policies now.

The Association of School and College Leaders has just released figures which show that 163 headteachers were sacked last year, and commented that local authorities have unrealistic expectations about the speed at which results can be achieved. 

For any business that employs more than a handful of people, there is likely to a structure in place in which some employees have managerial responsibility over others. Does this mean that the manager is responsible for the overall performance of their team? Is it fair to punish them for failures which could be due to circumstances under their control? On the one hand they are an easy scapegoat, as in the case of headteachers or football managers; sacking a leader is evidence of decisive action and a new beginning. If they were in charge then it must be their fault. However, this course of action often fails to deal with any underlying problems, either within the team or with procedures and working practices. 

Leaving aside the reasons for last year’s sackings, the £4 million paid out to school heads who were dismissed is surely evidence that problems could have been handled more effectively. So how should you deal with a failure to meet expectations in any of your employees? 

The first step is to ensure that an employee clearly knows what is expected of them. Are job descriptions up to date? Set SMART objectives (specific, measurable, agreed upon, realistic and timely) within a structured meeting, and keep meeting records.

Provide regular feedback, and deal with problems as soon as they arise.  

Remember that disciplinary action, especially dismissal, should be a last resort in capability cases, and that procedures need to be spot on to avoid potentially expensive mistakes. 

Jennie Horchover of The HR Dept.